Apollo Offered to Buy Out Cooper’s Partner

An employee works inside the warehouse at an Apollo showroom in Mumbai, Oct. 8.

WILMINGTON, Del.–Apollo Tyres Ltd., facing a costly lockout at the Chinese factory of its takeover target, Cooper Tire & Rubber Co., offered in September to buy out Cooper’s partner in the venture for as much as $200 million, according to court testimony Thursday.

The partner, Chengshan Group Co., rejected the offer and demanded as much as $400 million for its stake in the joint venture, known as CCT, Apollo Chief Financial Officer Sunam Sarkar said on the stand. He was testifying during the third day of a trial in Delaware court where Cooper is seeking to force Apollo to close the $2.2 billion deal that was announced in June.

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The CCT buyout offer, code-named “Project Charlie,” was Apollo’s stab at solving what had by then become a key obstacle to closing deal: Cooper’s deteriorating relationship with Chengshan, its partner in an eight-year-old manufacturing venture.

Chengshan itself had been interested in buying all of Cooper early this year, and having lost out to Apollo, has taken control of the jointly owned factory, Cooper executives have said in court. CCT is refusing to produce Cooper-branded tires or allow Cooper management to enter the factory or remotely access financial data, they say. Chengshan hasn’t publicly responded to those allegations.

The situation in China isn’t grounds for Apollo to terminate the deal, according to the terms of the proposed takeover. But the Indian tire maker says that without a resolution at CCT, which last year accounted for about one-quarter of Cooper’s $4.2 billion in revenue, it can’t sell bonds it needs to replace a $1.875 billion bank facility funding the transaction.

Apollo is seeking to renegotiate the $35-per-share price in light of the China problems, along with worsening performance at Cooper’s U.S. business and trouble reaching a new contract with Cooper’s U.S. labor union, which must consent to the transaction. Cooper is trying to force Apollo to follow through at the original price.

A ruling is expected early next week, before Cooper’s deadline to file its third-quarter financials with U.S. regulators–assuming the two sides don’t reach a settlement before then.

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